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City Manages Redevelopment Bill

The complex matter is being negotiated with the state; the city is solvent, leaders say.

A messy issue involving millions of dollars of public money apparently boils down to some bad bookkeeping at the state level.

That's the message the Watsonville City Council received Tuesday night as they approved a $1.1 million loan from city accounts to projects the now-defunct Redevelopment Agency had funded.

Local RDA funds have been a confused matter since Gov. Jerry Brown eliminated redevelopment agencies earlier this year and snatched future revenues to patch up the state budget.

The state has retained $1.1 million city staff believed was owed as the final disbursement in December. Watsonville had committed to spending $700,000 of that money on Sunny Meadows, a housing project, and other programs.

City Manager Carlos Palacios explained that a new state directive that came out this month said municipalities can make those payments from other funds, then the state will repay that final—unreceived—disbursement in two even payments in 2013.

Tuesday, the city council voted 4-0 to approve covering that cost until the state reimbursement is made next year.

The other issue related to RDA funds is the $1.8 million bill the city received earlier this year that spurred .

“We’re not going bankrupt. Nonsense,” said. “We’re actually in a very good place.”

Palacios explained that the state announced Tuesday it will negotiate with municipalities about those payments. Watsonville, the county of Santa Cruz and 25 other municipalities around the state have those unpaid bills that Palacios said were caused by "faulty reporting."

Seventeen cities have filed lawsuits against the state; Watsonville is not among them.

For the time being, the state has suspended payment deadlines, which were accruing tens of thousands of dollars in late fees, and will negotiate with cities and counties during the next 30 days, according to Palacios.

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